May 31st Market Wrap-Up
Knowing what each candlestick signal illustrates as far as investor sentiment, analyzing the overall market trend is much easier when you add those pieces together. Although the Dow has been drifting lower, testing the 50 day moving average for support, the evidence of any bearish conviction in the overall market is not illustrated based upon the sideways movement of the S&P 500 and the slow uptrend of the NASDAQ. The NASDAQ formed a Doji right on the T line earlier this week followed by a gap up bullish day on Wednesday. This not only revealed that the T line was going to act as support but the NASDAQ broke up through a downtrending resistance level. Because the analysis of any chart can be done very quickly, because of the instantaneous visual assessment, all of the major indexes can be analyzed in the matter of less than half a minute, allowing the candlestick investor to make easy and accurate assumptions about the overall market movement. If one index is trading higher while the other index is trading lower, this merely illustrates there is no general consensus between the Bulls and the Bears, the existing trend is likely to stay in progress.
The visual information provided in candlestick charts allows investors to make investment decisions at the appropriate times. A candlestick sell signal in the overbought condition, at an obvious resistance level, provides the probabilities that it is time to take profits. The same analysis is true when entering a trade at the appropriate time. Because candlestick charts are merely the graphic depiction of what is occurring in human nature, this provides a great advantage. Knowing that candlestick signals and patterns are created by the reoccurring decision-making of investor sentiment, the result following that signal or pattern provide high probability trades set ups. Applying very simple to use indicators such as the T line allows for much greater accuracy.
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The Candlestick Forum Team
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